Marcolongo & Anor v Mazoudier

• Cahill v Howe [1986] VR 630 CASES CITED : - Laird v Pim (1841) 7 M&W 474 [171 ER 852] - Noble v Edwards (1877) LR 5 ChD 378

TEXTS CITED : - CCH "NSW Conveyancing Law Commentary", para 24-595 - Stonham "The Law of Vendor and Purchaser" (1964) para 1833

Claudio Paul Marcolongo (First Plaintiff) PARTIES : Diane Mary Kathleen Marcolongo (Second Plaintiff) Mitchell Walter Mazoudier (Defendant)

COUNSEL : M.W. Sneddon (Plaintiffs) M. Mathas (Sol) (Defendant)

SOLICITORS : Dunstan Legal (Plaintiffs) Deacons (Defendant)

1 The Plaintiffs, by their Notice of Motion, sought an order under s 126 Civil Procedure Act 2005 (NSW) ("CPA") charging specified real and personal property of the Defendant in aid of an order for specific performance by the Defendant of a contract for sale of land. The application came before me on 28 November 2008 in the Duty Judge List. Having heard the submissions of Counsel for the Plaintiffs, Mr Sneddon, I refused the application and said that I would publish my reasons later. These are my reasons. 2 The Plaintiffs, as vendors, entered into a contract with the Defendant, as purchaser, for the sale of certain land. The Defendant failed to complete the contract according to its terms. The Plaintiffs commenced a suit for specific performance of the contract. On 2 May 2008, Brereton J made the following orders by consent: "2(a) The Court orders that the defendant specifically performs the contract between the parties dated 28th September 2007;

2(b) The Court orders that the defendant attend at settlement on Wednesday, 2nd July 2008 at 3.00pm at the National Australia Bank, Level 1, cnr King & Elizabeth Streets, Sydney, and to pay all monies due under the said contract, including accrued interest under the contract; and

2(c) The Court orders that the defendant execute all documents and do all things necessary in order to give effect to these orders." 3 On 27 June 2008, the Plaintiffs' solicitor wrote to the Defendant's solicitor enclosing a proposed settlement sheet which required the sum of $3,715,793.79 to be paid to, or at the direction of, the Plaintiffs on settlement on 2 July 2008. The Defendant's solicitor shortly thereafter ceased to act for the Defendant. The Defendant did not respond to the settlement figures proposed by the Plaintiffs' solicitor and did not attend for settlement on 2 July 2008. 4 The Plaintiffs have ascertained that the Defendant is the sole registered proprietor of eight parcels of land and is registered as co-owner of another parcel of land with his wife as tenants in common. Apparently, some if not all, of the properties are subject to encumbrances. The Defendant is also the registered mortgagee of a certain parcel of land and owns shares in a number of companies. 5 Section 126 CPA provides: " Operation of charging order in relation to specified security interests

(1) This section applies to the following kinds of property in relation to a judgment debtor (referred to in this Division as security interests ): (a) stock and shares in a public company, (b) money on deposit in a financial institution, being: (i) money held in the judgment debtor's name in the judgment debtor's own right, or (ii) money held in the name of some other person in trust for the judgment debtor, (c) any equitable interest in property.

(2) Subject to the uniform rules, a charging order operates, in relation to each security interest specified in the order: (a) to charge the security interest in favour of the judgment creditor to the extent necessary to satisfy the judgment, and (b) to restrain the chargee from dealing with the security interest otherwise than in accordance with the directions of the judgment creditor.

(4) Despite subsection (3), the judgment creditor may not commence proceedings to take the benefit of a charge arising under a charging order until after the expiration of 3 months from the date of the order.

(5) A charging order entitles the judgment creditor, in relation to the security interests charged by the order, to any relief to which the judgment creditor would have been entitled had the charge been made in the judgment creditor's favour by the judgment debtor." 6 Mr Sneddon says the section is applicable in the present case because, by virtue of the orders made on 2 May 2008, the Plaintiffs are "judgment creditors" and the Defendant is a "judgment debtor" , within the meaning of the section. He points to the definition of "judgment creditor" in s 3 CPA, namely: "judgment creditor means the person to whom a judgment debt is payable" . "Judgment debtor" means "the person by whom a judgment debt is payable" . "Judgment debt" is defined as including: "(a) any amount payable under a judgment, and (b) any interest after judgment that is payable on that amount under section 101, and (c) any other amount payable under rules of court without the need for a judgment."

"Judgment" is defined as including "any order for the payment of money …" . 7 Mr Sneddon says that a "judgment debt" arose on 2 May 2008 when the Court ordered that the Defendant specifically perform the contract and, further, ordered that the Defendant attend settlement at a specified time and "pay all monies due under the said contract" , including interest. Mr Sneddon says that that order meant that the amount payable by the Defendant on settlement of the contract was "an amount payable under a judgment" within paragraph (a) of the definition of "judgment debt" . 8 I am unable to agree. A "judgment debt" within paragraph (a) of the definition and within the operation of s 126 CPA arises when a judgment of the Court specifies the precise amount which the Court orders is to be paid when the judgment takes effect. That amount is then "the amount payable under a judgment" in paragraph (a) of the definition and it is interest on that amount which is referred to in paragraph (b): see e.g. Cahill v Howe [1986] VR 630. 9 In the present case the Court, on 2 May 2008, did not order the Defendant to pay the Plaintiffs a specific sum of money. It ordered the Defendant to perform the contract according to its terms. Unarguably, one of the acts of performance by the Defendant was to pay money, but the precise amount to be paid could depend on a number of contractual provisions, applied in the events that happened, not just upon a mathematical calculation of adjustments of rates, taxes and outgoings as between vendor and purchaser as at a stated settlement date. 10 Further, the obligation of a purchaser under a contract for sale of land is not limited merely to paying the money to the vendor and nothing more. One of a purchaser's obligations is to relieve the vendor, upon completion, of possession of the property: see e.g. Stonham The Law of Vendor and Purchaser (1964) para 1833. 11 In making an order for specific performance of a contract the Court usually does no more than attach the sanction of contempt proceedings to a breach by the defendant of whatever obligations the defendant has to perform under the contract. If the defendant then fails to perform those obligations, the plaintiff may seek to compel performance by invoking the Court's sanction for contempt or may, with leave of the Court, terminate the contract and claim damages. The plaintiff's choice usually depends upon whether the defendant's breach of the Court's order is deliberate - i.e. the defendant is able to perform but chooses not to perform - or involuntary, in that the defendant simply cannot perform, usually because of financial incapacity. 12 If a purchaser fails to perform a contract, even under threat of punishment for contempt of an order for specific performance, the vendor is not entitled to recover the purchase price by way of damages: he may recover only the difference between the purchase price and the value of the land remaining in his hands, and he must prove that amount to the satisfaction of the Court before judgment will be entered in his favour for payment of a specific amount, resulting in a "judgment debt" : Laird v Pim (1841) 7 M&W 474, at 478 [171 ER 852]; Noble v Edwards (1877) LR 5 ChD 378. 13 In this case, the Plaintiffs seek to compel performance of the Defendant's obligations to pay the purchase price by taking security over the Defendant's other property under s 126 CPA, realising that security, and using the proceeds to pay themselves the purchase price. But they will be entitled to the purchase price only if they divest themselves of the land, that is, if the Defendant actually takes title. If the Plaintiffs are left with the land, they cannot have the purchase price as well. 14 The predecessor of s 126 CPA is s 27 Judgment Creditors' Remedies Act 1901 (NSW). That provision has been in force, in one form or another, for over one hundred years in this State, yet I have never encountered its application directly in aid of an order for specific performance of a contract for sale of land. Mr Sneddon said that he could find no decision of any court supporting application of the section in the way he sought. 15 However, Mr Sneddon said that his argument was founded upon a passage in the CCH NSW Conveyancing Law Commentary at para 24-595. There, under the heading "Enforcing order for specific performance" it is said: "A vendor when seeking an order for specific performance may attempt to enforce it against the purchaser's property, e.g. by obtaining a charging order under the Civil Procedure Act 2005 (the procedure is covered in r 39.44 of the Uniform Civil Procedure Rules 2005)." 16 No authority is cited for this proposition nor is there any further elaboration of it. 17 In my opinion, for the reasons I have given, that proposition is incorrect. 18 Because I concluded that the relief under s 126 CPA sought in the Plaintiffs' Notice of Motion could not be granted, I dismissed that part of the Notice of Motion. The Plaintiffs should be left to their usual remedies, i.e. compelling performance by the Defendant by means of contempt proceedings or else rescinding the contract and suing for damages. If they take the latter course and have judgment entered in their favour for a particular amount, they may then have recourse to s 126 CPA, if the other conditions of the section are satisfied. - oOo -

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